Some of the world's most exciting sunken treasures could soon be on view after Egypt confirmed plans to build a giant underwater museum in the Mediterranean.

But as preparation begins on the site of Cleopatra's Palace in Alexandria, funding and technical problems are proving as divisive and controversial as the famed queen herself.

Ancient Alexandria was one of the world's great centres of civilisation, and since excavations in the eastern harbour began in 1994, divers have unearthed thousands of historical objects. These have included 26 sphinxes, several vast granite blocks weighing up to 56 tonnes each, and even pieces of what is believed to be the Pharos of Alexandria lighthouse, one of the seven classic wonders of the world.

Remnants of Queen Cleopatra's palace complex are also submerged beneath the waves, after the island on which it stood fell victim to earthquakes in the 5th century.

Now ambitious but controversial plans are under way to open up this unique site via an immersed fibreglass tunnel which would enable close-up viewing of the underwater monuments. The designs were drawn up by the French architect Jacques Rougerie, a veteran of water-based construction projects, and have been backed by the United Nations cultural agency Unesco.

Next month a detailed technical survey will be launched. "If all goes according to plan, construction will begin in early 2010 and be completed within two and half years," says Ariel Fuchs, a scientific director at Rougerie's firm.

The idea is also being promoted by the high-profile marine archaeologist Franck Goddio, who is currently touring Europe with a selection of artefacts already dredged up from the Alexandrian coastline.

Yet the project is running into obstacles. Funding for the museum, which will cost up to $140m (£98m), has not yet been secured.

The government is hoping private companies and organisations will foot the bill, but a member of the architectural team admitted that "nobody is clear about where the financing will come from".

Even if money does come through, a series of formidable technical challenges await the museum's builders, including the question of how to combat the bay's notoriously murky waters to improve visibility in the tunnel, and the problem of ensuring the structure is strong enough to withstand underwater currents.

More worryingly, the project has been accused by sceptical locals of being little more than a ''corporate theme park'' with many doubting it will be built at all.

"As an idea it's perfect," says Dr Ashraf Sabri, who runs a local dive centre specialising in marine heritage sites. "But you have to get down there and do the scientific work to see what is practical and what isn't. And month-in, month-out, this has not been done."

For Egypt, the stakes are high. Alexandria, the country's second city, has been long overshadowed by Cairo and Luxor, and the government wants it to become a new focal point for the 12 million foreign tourists that visit each year.

"For too long Alexandria's great history and multicultural background hasn't been sufficiently respected," says Naguib Amin, local site manager for the Supreme Council for Antiquities.

Amin rejected claims that money would be better spent giving a makeover to the city's crumbling downtown buildings, most of which feature stunning colonial-era architecture. "We view the museum as an integral component of revitalising the city as a whole," he said.